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The Asian Tea Alliance: The New Co-opetition

The Asian Tea Alliance (ATA) announced in April 2019 in a memorandum of understanding (MOU), an agreement to act rather than a formal plan, between the main industry and policy organizations in five tea-growing countries: Indian Tea Association, China Tea Marketing Association, Indonesian Tea Marketing Association, Sri Lanka Tea Board and Japan Tea Association. It is representative of the trend towards co-opetition as critical to the future of tea growing in an era of climate change, global overcapacity, disappearing operating profit margins, and labor and social turmoil.

Co-opetition can be summarized as “Collaborate in the morning so
you can compete in the afternoon.” It’s very different from a cartel—cooperate
so we can stop outsiders competing—or a NAFTA-like trade treaty. It is a formal
group publicly committed to working together on a specific area where the
collaborative gains outweigh individual advantage.

The BBC summarizes the issue as “Tea industry’s future rests
on corporate collaboration” and points to how the largest “tea
companies are laying to one side their competitive instincts to protect the
long-term future of their business” through transparency and authentication,
Fair Trade, Rainforest-UTZ, the Ethical Tea Partnership, and supplier
identification. ATA works from the other end of the value chain.

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The viability and impact of ATA is unclear. It is an MOU only. It
may drift, lack financial and organizational resources or not be a priority for
national policy makers and industry leaders. But it is part of a growing trend
away from “Go it alone” to “We can only work on this together, “This” is the
future of the tea industry. And ATA is the largest force in trading.

Here are rankings of the top ten countries in tea Production
(millions of metric tons), Exports and Imports. ATA nations are highlighted.
They absolutely dominate production and exports and, correspondingly, are
minnows in imports.

Tea Exports and Imports (ATA members shaded)

Production

Exports

Imports

1

China

2.5*

China

1.8

Pakistan

0.6

2

India

1.3

Kenya

1.1

Russia

0.5

3

Kenya

0.4

India

0.8

USA

0.5

4

Sri Lanka

0.4

Sri Lanka

0.7

UK

0.4

5

Vietnam

0.3

Germany

0.3

Egypt

0.3

6

Turkey

0.2

Poland

0.2

Germany

0.2

7

Indonesia

0.1

Japan

0.1

Morocco

0.2

8

Myanmar

0.1

UK

0.1

Japan

0.2

9

Iran

0.1

USA

0.1

Vietnam

0.2

10

Bangladesh

0.1

Vietnam

0.1

France

0.2

*Reported in millions of metric tons

For the ATA, the agenda is expanding both the size and quality of
the trade space and mobilizing to move forward on sustainable development as a
block. The specific targets are:

Trade: within the
major markets of Europe, Russia which produces virtually no tea but imports
$500 million worth, mostly from Kenya; the US, which is among the fastest
growing tea re-exporters as well as a major importer, and West Asia; a cluster
of very varied countries, including Turkey, the Middle East and Iran, as well
as between China and India.

Cultural exchange: Trade
delegations are a key factor in tea trade relationships. They serve many
purposes, such as informally fueling communication, testing out proposals and
agreements, and `bringing together senior industry, political and NGO
officials. Sri Lanka has long relied on these to help build its export markets,
and smaller players such as Vietnam and Indonesia draw heavily on them to make
its case for relaxation of import restrictions by countries such as Japan.

ATA emerged from a series of such interactions, with a pivotal MOU
in December 2018 that focused on global market promotion of China and India as
premium producers.

Technology exchange: This is an
underexplored area of opportunity. There are pockets of advanced application
but little sharing of information, expertise and experience. China is the
global leader in drones for precision agriculture and Japan in robotics. There
is plenty to share.

Global promotion: Here, the broad
message is that the era of mediocre commodity tea is over for the ATA growers. Today,
there is a massive oversupply of bulk tea. Climate change throws the entire
market into uncertainty and volatility. Sri Lanka and Kenya are in severe
droughts that have halved output.

Prices drop with oversupply and costs increase with
underproduction. The future of tea rests with premiumization, a message the ATA
aims to make its brand.

Asian sustainability agenda:
This is obviously central to co-opetition across every area of tea, from bush
to cup. The broad agenda is to focus on the UN-mandated SDGs – Sustainable
Development Goals – drawing on implementation support from such
organizations as the Solidaridad Network, a
strong backer and enabler of the MOUs. This is funded by four European
governments and the International Finance Corporation.